Date sent: Tue, 01 Feb 2000 16:50:27 -0500
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From: Louis Proyect <[EMAIL PROTECTED]>
Subject: [PEN-L:15929] Airplanes falling out of the sky
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It may in interesting to look at the recent history of the Canadian
Airline industry for the destructive effects of deregulation on the
airlines. Under the regulated system we had two national airlines
which competed only on higher density domestic runs and then
rates and schedules were regulated. With deregulation we had the
gradual bankrupting of Canadian Airlines, the growth of the hub
system which means huge congestion at Toronto (with major
delays and safety problems), the decline of direct service from
places like Winnipeg, particularly overseas, very poor service south
having to rely on Northwester with its Minneapolis hub, the rise of
identical schedules (Air Canada would fly to Toronto at 0800,
Canadian at 0810) and rising fares to non-trunk destinations. (It
costs a little more than half as much to fly from Winnipeg to
London, England than to fly 500 miles north of Winnipeg to
Thompson.) Service to the mainline hubs from smaller centres was
largely provided by 'partners' of the two national carriers which
relied on lower wages and benefits from workers. I don't know what
their safety records were like, but I do know that those of the small
independents were not very impressive.
Because of unregulated competition, Canadian was taken over by
Air Canada as it approached bankrupcy though there was an
attempt by American Airways to take it over indirectly but this was
not allowed under Canadian law. My understanding is that in both
Canada and the US, the _average_ price of tickets rose after
deregulation though this was largely due to increased price
discrimination with rising business and regular fare rates (paid in
part by government as fares are deductable as a business cost)
somewhat offset by competitive seat-sales to fill the extra seats. It
was the competitive seat-sales that ultimately brought economic
ruin to the industry. Reminiscent of the railway competition in the
late 19th C before consolidation and regulation.
It would appear, by the way, the deregulation of the trucking
industry in Canada has been much more detrimental in both the
bankruptcy of numberous trucking companies and a major decline
in road safety, particularly with low-wage competition with Mexican
truckers. At least the reputation, as well, is that the Mexican
trucks don't meet Canadian safety regulations but that, given the
cutback in inspectors, etc., they are not being caught. Is that the
case in the US?
Paul Phillips,
Economics,
University of Manitoba
